Samsung Electronics has pulled out all the stops on its new Galaxy smartphones, but their lower prices compared to the latest iPhones throw an uneasy spotlight on the long-term cost of fighting Apple's premium branding.
According to IHS Technology, Galaxy S6 edge's 64GB model costs $290.45 to make which is more expensive than any Galaxy S model and iPhone analyzed by the US research company. For the price of producing 100 sets of this S6 edge model, Apple can make 121 sets of 64-GB iPhone 6 Plus, calculations by Reuters show.
Samsung's flagship devices since the Galaxy S II costs more to build but sold at similar prices of comparable iPhones -- sometimes those with even smaller storage. Consumers paid similar amounts for the 32-GB versions of the Galaxy S4 and S5 as Apple's 16-GB models for the iPhone 5 and 5S, according to IHS. In the case of the new S6 edge, the 64-GB version sells for $799.99 in the United States (without a carrier subsidy), less than the retail price of $849.99 for the iPhone 6 Plus with the same storage capacity.
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The major reason behind this gap is that Apple's iOS operating system and sturdy software and services ecosystem commands a much larger premium among consumers. For competing it, Samsung has to offer higher quality hardware to stand out in an increasingly crowded marketplace but can't fully reflect those costs with higher retail prices. Should this trend continous, margins for Samsung's mobile business could be compressed further, and the only way to offset that is to rev up sales volume.
Another factor in Apple's favor, analysts say, is the economy of scale it enjoys by sticking with just one or two new models each year. Samsung, on the other hand, has a far larger portfolio of phones that retail for as little as $100 or as much as the S6 edge.